On Monday Yanzhou, the big Chinese coal company, pulled its mop up bid for its 78% local arm, Yancoal (YAL). While there wasn’t any explanation, the weak state of the coal industry here and in China undoubtedly played a part.
Earlier this year Yancoal revealed a total 2013 loss of more than $800 million thanks to weak sales revenue, asset impairments and write downs.
Yesterday, New Hope Corp (NHC) confirmed that weakness with 66% slide in net profit for the for the six months to the end of January.
The company also held out little hope of an improvement in the near term, thanks to weak coal prices.
Net profit slumped to $22.7 million from $68.8 million for the first half of 2012-13, even though coal sales rose by more than 11% to 3 million tonnes from 2.7 million tonnes. But clean coal production fell 11.3% to 2.7 million tonnes in the half year, from 3 million tonnes previously.
Revenue fell to $285 million from $323 million as the drop in prices slashes returns in the half.
The slide in profit saw earnings a share drop to 2.7c from 8.3c.
That didn’t cover the unchanged dividend of 6 cents a share.
Given New Hope has a cash pile of $1.1 billion, paying a steady interim was an easy decision for the board.
The interim profit was in line with New Hope’s earlier forecast of a net profit of $21-23 million.
NHC 1Y – New Hope to pay steady dividend despite profit crunch
New Hope is part of the Brickworks – Soul Pattinson group of companies, which includes TPG, which also reported yesterday. But reported a far better outcome for its first half.
New Hope’s Chief Executive Officer, Shane Stephan, said: "New Hope is managing the current downturn in global coal markets with a clear focus on cost management and operational efficiencies."
"We have managed our total production costs by revising mine plans at New Acland and Jeebropilly and implementing productivity improvement initiatives at all of our sites. We will continue to pursue responsible cost reductions.
"While conditions remain challenging for all Australian coal producers, New Hope is well- placed to withstand the downturn due to its comparative low cost of production, diversified asset portfolio and its strong balance sheet," Mr Stephan said in yesterday’s statement.
"While demand for thermal coal remains firm, and in the long term high-quality Australian export coals will continue to expand their export volumes into Asia, oversupply is likely to limit any significant improvement to spot thermal coal prices over the immediate term," directors said in their outlook commentary.
The shares eased 1.2% to $3.15 in yesterday’s market.
